The rapid adoption of electronic wallets or e-wallets has allowed payment gateways to connect banks with small and medium-sized businesses that were previously not online. Through these payments solutions, Fintechs (financial technology companies) are creating an accelerated new digital ecosystem with more players. They integrate the traditional banking system and the new means of payment which are offered to their users. The current COVID-19 situation has provided a perfect test ground for the digital transformation as working from home, and especially making purchases from home are now becoming a new norm.
Rubén Salazar, Senior Vice President of Visa Products for Latin America and the Caribbean, presents the challenges that the sector has had with digital payment methods in the midst of a pandemic.
What challenges does the pandemic pose for businesses and banks?
The pandemic accelerates a series of digital transformations due to the need to serve consumers more remotely. Both businesses and banks will have to accelerate that transformation and create the conditions to reach consumers on their mobile devices.
This generates a series of opportunities and challenges. The largest will be for small and medium businesses that were not ready to participate in digital ecosystems. Therefore, they must make investments to reach more clients. Banks will now have to explore another way to reach users who are unable to go to a branch.
For commerce, it means reinventing a new way of distributing its products and reaching the final consumer, and achieving a greater presence on the internet and how to make transactions on mobile devices.
Which sectors were the most advanced?
Banks that were already digitized and have e-wallets that allow consumers to use their debit and credit cards through mobile applications.
What trends will we see in the means of payment?
Everything that banks and payment systems can do to speed up the money transfer instantly like direct payments. This will favor the transfer in real time. The other major investment is in token, because a vulnerability is created by maintaining payment credentials across multiple devices. People now have their payment credentials in many applications: Spotify, Netflix, on mobile, on the computer, and it's a risk. But when you have a “tokenization” model, the multiplicity of credentials is eliminated and it is replaced by an encrypted one for that device or that particular site. It is important to remove the credential value, to avoid data theft.
How much has the use of electronic payments increased?
This depends on the categories that were ready to accept these payment methods. For example, in large stores that closed, there was a reduction in transactions; as well as a fall in consumption for the purchase of airline tickets; hotel reservations; and tourist packages that are bought with credit cards. But on the other hand we see that 15% of all payment transactions that currently happen in Panama, are made in a contactless payment model, and it is a category that will continue to grow in the pandemic, and later.
The other is home delivery of products that helps grow purchases through digital payment methods. Internet shopping has also increased for businesses that offer alternatives to reach users. The value of e-commerce transactions in Panama is estimated at $700 million. As more SMEs incorporate digital means of payment, the volume of electronic purchase will rise.
How to stimulate new digital businesses?
We have a business area that supports affiliated establishments and we have a series of facilities to help small and medium-sized businesses to integrate with new payment technologies. We work with partners in various countries, to affiliate smaller and medium-sized businesses to digital payment systems. The MPOS Global is also available to small businesses, which are devices that connect via bluetooth to the phone and allow electronic transactions.
What opportunities do SMEs have?
There are many opportunities, but first you must redefine your digital strategy:
1. What is your presence on the internet? There are businesses that have a website, but do not allow them to sell or buy.
2. What is their presence on mobile devices? Consumers are not shopping as much on their personal computers, but on mobile phones. Merchants should check if their platforms are compatible with mobile devices.
3. What is the ability of the business to sell online? Many times they have the capacity, but cannot accept cards. The solution is to find how to connect to payment gateways to accept card payment.
4. How to manage the delivery chain? It is essential to analyze the logistics of how to get to the customer and for this, businesses must seek to ally with the delivery platforms. The opportunities to attract more restaurants, shops, department stores and other services, and products to these platforms of the digital economy, in a context in which electronic transactions are growing more than physical ones. There are small restaurants that have seen a decrease in their physical sales, but they have an online presence and home deliveries that help them face the crisis. We have a whole plan to help companies. A lump sum of $210 million is being dedicated to help SMEs in the next five years. And more immediately $10 million to support emergency funds for Covid-19 worldwide.